SEATTLE POST-INTELLIGENCER EDITORIAL BOARD

Published 10:00 pm, Tuesday, January 13, 2004

The advent of the Internet has meant rethinking and reworking institutions -- including the methods used to collect sales taxes.

The Legislature has an opportunity to begin that process. The Streamlined Sales Tax system would help governments collect taxes for online retail sales, a phenomenon costing billions in lost revenue.

Technically, online buyers are supposed to report their purchases and remit the taxes. Right.

So it will be necessary to enlist Internet retailers' cooperation -- by consent or rule of law -- in collecting and remitting the taxes due. The SST would help retailers voluntarily do so by assessing the sales tax at the point of delivery rather than the point of sale. If an online shopper in Kent bought a computer from a dealer in Connecticut, the dealer would automatically tack on sales tax at the appropriate rate for Kent and remit that amount to Washington state, which would pass down Kent's share.

Eliminating the sales-tax loophole on Internet sales would benefit governments by requiring collection of the taxes due on the sale and benefit local retailers by eliminating the tax-free price advantage currently enjoyed by their out-of-state competitors.

But it could be a double-edged sword for local governments with large retail tax bases. If a shopper were to buy a computer in Kent and have it delivered to her Medina home, the sales tax would be credited to Medina, not Kent.

But the greater risk is the increasing loss because of out-of-state Internet sales. They deliver a double whammy. They cost local governments taxes and cost local merchants business.